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Last week I wrote a post entitled Value Creation for Private Investors that went largely ignored as it was one of my lowest viewed posts of the new year for a Monday when most of you tune in. The idea about which I wrote was a revelation to me but it was still nascent at the time and thus very undeveloped and weakly presented. But it gnawed at me and so it kept turning in my head. And now it pops out again this week hopefully a bit more developed. The idea is the transition we are making from creating the illusion of wealth with financial engineering to needing to truly drive wealth with productivity gains which will make for a golden age in Operations and Operational Excellence.

As a nation, we will flourish based upon our ability to drive productivity. You see wealth, as measured by GDP, during the majority of our lifetimes has been driven by population growth. But as our population growth slows, wealth will only be created by increased productivity. This transition has been hidden from us for some time by the illusion of wealth creation brought about by high capital liquidity and inappropriately priced risk which eventually lead to the bursting of a financial bubble. But with risk being more appropriately priced, the illusion is gone and we are now faced with long term slow growth and the only way to stoke it is with increased productivity.

There are four new drivers of productivity, and success in each depends on the technology and talent we develop. The first is how the sheer volume and increased access to shale gas in regions around the globe is changing the energy debate and the balance of energy power. It would require real infrastructure and pipeline integration between Canada, Mexico and the U.S., but North America could achieve energy independence within 10 years. The second driver for dramatically increased productivity is applying the lessons of social media to the industrial world and building what we call the Industrial Internet. By owning and connecting the analytical layers around industrial products  and using real time data to extract real timeknowledge we can improve asset performance and drive efficiency. The third driver is speed and simplification because the only way to serve our customers better and compete in a complex world is by working faster and smarter. The last productivity driver, and related to the other three, is the evolution of advanced manufacturing. Manufacturing excellence, forgotten for too long, is once again a competitive advantage.

Drive Value with OpEx

Now when you look at this argument about from where we will get the productivity growth, a problem jumps out. Namely, we have to generate non-population related productivity gains with a population that isnt geared to Immelts productivity drivers. Our younger citizens certainly are better aligned and skilled but as population growth slows, they will be the minority.

So guess what — the knowledge of how to improve services, products and processes is really valuable. Now Im not talking about how to write a project charter or write up a SIPOC. Im talking about revolutionizing energy with process innovation in the extraction of natural gas, the development of the cloud so we can jettison underutilized servers from expensive IT budgets and citizen publishing of information so knowledge flows freely and into every nook and cranny of the population instantaneously. Imagine  those have all happened in the last five years. Those are the types of improvements that transform an economy. But there is plenty of room between a project to save an AP process two days and reinventing the extraction of fossil fuels. And every time a new industry is targeted, all the operating processes below the top level change will also be looking to improve.

Can you imagine where these big seismic changes will happen next? How about redesigning education so everyone has access to knowledge inexpensively? Or health care where we can all see an insanely low level of simple IT tools that if applied would eliminate gobs of waste. Or all levels of government where we have constantly rising costs with little measureable gains in services. These trends will continue. They must continue or we, as a nation, will slowly lose our global relative wealth. And I just dont think Americans are ready for that. But the changes will be disruptive.

In the race to drive wealth through productivity gains, we will see the greatest impact in processes and services simply because they are the largest percentages of the economy. Ive already named drilling services, the cloud, newspapers & magazine publishing, health care and education as service companies which either have gone through or are poised to go through significant redesign. What of the process side?

Systematically Driving Value with OpEx

Well I think we are going to see work get reinvented. My former colleague at Qualtec, Mitch Lawrie, is working on software to focus management on results versus activities and my recent blog on the subject drew significant attention from many of you. We have worked with several clients in financial services, telecom and transportation which are redesigning long accepted processes to drive greater than 50% reductions in key process cycle times by making them leaner, reducing complexity and capturing information better as well as analyzing it for knowledge.

To return to my original post, my aha moment was that I was at a private equity conference where investors of all sizes where lamenting they could no longer make easy money. That easy money was driven by a combination of capital liquidity, high tolerance for risk and poor quantification of that risk. It was a recipe for a bubble. If you bought an asset, held it and sold it before the bubble burst, you made money. If it was levered, you made a lot of it. The funny thing is that private corporate investors werent the only players at the casino. We were all there with real estate and stock portfolios.

But that is gone now. And as we look into a new environment, we realize we are facing the longer term challenge of slowing population growth and an aging population that isnt skilled at what is needed to drive the sort of productivity gains needed to maintain historic wealth creation. To create wealth as a country, we now have to earn it the hard way. And since there are only so many hours available in the work force, it means we have to work smarter.

And a clearer definition of that aha moment brings me to the message in this post. We figure out ways to work smarter  whether it is a fifth level sub-process or an entire industry. The result is that we are entering a golden age for people focused and skilled at how to work smarter. We have the opportunity to make great contributions to our economy. I urge you all to THINK BIG. If youd like to discuss, feel free to contact me.

A key aspect of service organizations is the flow of information. In fact, a core process in any financial service organization is that information flow. There are many steps about which we have written on how to implement process improvement in service organizations. One of the most popular articles was “What About Lean in a Services Environment?”.

Lean, with its focus on identifying the Elements of Waste, is a powerful concept in a services organization. This article is meant to drive down one step further into using Kaizen events to eliminate said waste. But when it comes time to actually make improvement changes, Kaizen is one of the fastest and cumulatively most impactful activities a service organization can implement.

Our Lean Quickstart Powerpoint Presentation

Kaizen (k-eye-Zin), defined by the Japanese as continuous incremental improvement, is a fast and furious implementation of continuous improvement activities designed to create radical and sudden changes in business processes. During a week of highly focused activity, a cross-functional, section specific team receives training on specific tools and techniques needed to analyze and improve a process immediately. There are 10 key steps to this process and they are:

1. Training  The key issue is to select a small group of individuals to be trained as mentors who will also be the key person to select the team members.
2. Project Selection  We have written extensively about the need for projects to be aligned. A few of the articles are “Let Your Business Define Your Performance Improvement Program” and “Business Process Management (BPM) = Robust Project Pipelines After the Low Hanging Fruit is Harvested“. But along with alignment, project selections should be cognizant of the impact the project will have on the specific area in which the project is to be conducted a well as any up or downstream effects.
3. Team Selection  The team must start with subject matter experts from the targeted process area. But it should also be cross-functional and include process owners, finance & admin personnel, IT personnel and anyone who has pertinent knowledge of the project process. These people should be open minded, willing to challenge the status quo and influential in the organization.
4. Value Stream Mapping  This is a hands-on technique utilizing flow charting and icons to analyze information flow in graphical form. The team will identify and compile all the specific elements necessary to bring a service from inception to delivery. The purpose is to understand the relationship between process steps and identify those areas most in need of improvement.
5. Process Mapping  The process map is more focused on one part of the oeverall process than the value stream map discussed above and provides more detail. When a team builds a process map it allows everyone to agree on the actual steps performed to produce the product or service. Its a great tool for identifying non-value added process steps and reducing complexity. This begins the team’s root cause analysis.
6. Developing Baseline Data  You must develop Primary Metrics to improve a process. In fact, it is the development of that Primary Metric that often leads to and is an indication of improvement.
7. Creating Spaghetti Charts  This is a visual diagram depicting the information, personnel, and document movement in a process, department or entire service organization. It is a great first step to eliminating waste in motion and conveyance.
8. Conducting Time Study Analysis  This tool is used to collect and verify cycle time data relative to an operation or process. This provides for careful study of each aspect of the process and continues to contribute to root cause analyis.
9. Developing Continuous Improvement  This is where the team records the changes to be implemented resulting from the analysis of collected data and brainstorming. The purpose is to identify improvements and their implementation.
10. Implementing Appropriate Changes  It seems all that is left is to implement the improvement. But along with implementation, the team should develop Control Plans so 30 to 60 days after implementation one can assess the impact of the process changes.

our Learning About Lean Executive Brief for a good overview of Lean

Service organizations are unique in their reliance on people and information. Those two organizational elements are the service companies most valuable assets. One might say customer relationships are the most valuable asset but to a great extent, those relationships are entrusted to those people and organizationally captured through information. If you are part of a service organization team and looking to drive improvement FAST, then look at the aforementioned 11 steps to implement Kaizen in a service company.

If you would like to discuss case studies of organizations that have done this, then contact me.

With a child approaching college age, Ive taken a great personal interest in the direction of higher education. As evidenced by the national debate that has even leaked into presidential politics, it is a tremendous issue on the scale of healthcare and job creation. The greatest point of debate is the sustainability of the rising cost of education which has grown far faster than inflation and disposable income. And along with the rising cost comes a discussion of how it is being financed as student loans become the greatest category of consumer loans. A discussion about costs and funding naturally leads to trying to gain an understanding of why the costs rise so quickly and if the quality of education is improving along with the level of investment.

With growing awareness and understanding, I recently had an interesting e-mail exchange with a new blog subscriber. This person had some very interesting views from the inside of higher education as they are a high ranking official in the administration of a regional mid-sized university. She shared some of those views with me in the following e-mail. I found them so topical and in concert with the value our profession attempts to bring to our host organizations that I asked and received permission to share them with you. So below are excerpts of a high ranking administrators views of what is driving the cost of higher education and whether it is resulting in better results.

Ive been mulling over a response to your last email.

You commented that higher education is more mission driven than the business world. From the outside, it may appear that higher ed is very mission driven, but in day-to-day operations, expectations from many other sources often intrude.

We do have a calling, but we must also answer to our own faculty, campus committees, boards of regents, state legislatures, the federal government, and our accreditors regarding HOW we should fulfill our mission. Its both frustrating and challenging to try to navigate the sometimes conflicting and seldom funded expectations of these varying bodies. So, yes, stakeholder expectations have to be managed before forward movement can be sustained. We are a bit like a loaded freight train leaving the station: forward movement is jerky and sustainable momentum comes slowly.

The main customer in higher ed is the student. In the last decade, institutions tried to respond to wishes of the customer in non-academic areas (e.g., climbing walls, bistro dining, private rooms in residence halls). By the time many of these can be implemented, those students are gone and others with different expectations have matriculated.

Institutions are starting to move back to basics that serve customer needs better (e.g., ways to get students to graduation in less time and at a lower cost). Our governor, along with governors from other states, has been pushing to ensure a fixed and affordable cost for a degree. We are implementing that at our organization as are many other colleges in our state.

So, we have a balancing act when we respond to the customer that a corn flake producer does not (ormaybedoes not). I do hope corn flake producers think about nutrition while thinking about taste and texture. Higher ed has to think about what happens after the student graduates. Can the student get and keep a desirable job? Do we produce graduates whom firms want to hire? Our secondary customer is anyone who hires our graduates. Sometimes what students want (less homework, say) conflicts with what the student, and ultimately his/her employer, needs. Im not sure corn flake makers deal with whatever would translate to being a similar issue.

From my viewpoint on the outside of the commercial world, they look a lot more organized and forward thinking than higher ed often seems. I realize Ive painted higher ed with very broad strokes, and some institutions have found solutions to the major issues and are rolling forward fairly smoothly. Higher ed has made really good progress, but I still think, as a whole, higher ed lags behind the real world.

I have been reading a lot about organizational excellence, Six Sigma, Kaizan, 5 whys, Deming, etc. I look forward to reading your pieces on Voice of the Customer.

Good luck with being a parent of almost-grown children. I admire all of you so much. It has to be especially tough right now.

There are so many places where our knowledge and skills can assist the transitions that are coming. Healthcare, Innovation (the engine of job creation) and Higher Education are three strong societal needs where the answers to the problems can be enhanced by our operational excellence practices. There is definitely the opportunity to do well while doing good. And there are great potential partners inside of the enterprises and organizations that are in these areas who recognize the need for change and want to be agents of change to fulfill personal missions and also do well while doing good. These observations that are from the inside out in higher ed are just one example.

this short .ppt that talks about the sources of excess costs that might be attacked with operational excellence programs …

If youd like to discuss any of the above, feel free to contact me directly. And, while the author of the e-mail wished to be anonymous, if youd like to speak to them, contact me and Ill try to put you in touch.

Why should the healthcare industry vigorously pursue the use of Lean Six Sigma? As a business made up of people, products and services, and has a need for financial viability, healthcare faces problems and challenges similar to all organizations. But along with the normal challenges facing any business, in the case of healthcare, there are mounting societal pressures to lower costs, increase service and increase quality. It must move forward yet seems intractably caught in itself.

The benefits of Lean Six Sigma are significant and have been demonstrated in many different industries and enterprises around the world. Lean Six Sigmas most significant results are the impact to customer satisfaction and the financial returns that result from the optimization of processes and the elimination of defects. From its application, many notable companies report improved market share and financial results. But most importantly in relation to healthcare, these companies also report major changes in the underlying corporate cultures. This cultural change towards objective, data-driven decision-making, coupled with a process orientation in problem solving, has changed the way the companies and their employees approach the management of businesses.

It is the cultural transformation that healthcare is in greatest need. Healthcare service organizations have complex, lengthy processes and thus are particularly prone to fire fighting and living with the resultant inefficiencies. Managers and employees rush from task to task, not completing one before another interrupts them. Serious problem-solving efforts degenerate into sub-optimized patching. Productivity suffers, and managing becomes a constant juggling act of deciding where to allocate overworked people, or which incipient crisis can be ignored for the moment. At best, this leads to situations where employees are continually working around the problems consuming time and resources. At worse, the inefficiency of the organization is poor and chronic fire fighting consumes a sizable portion of the organizations resources. It is impossible to improve when in this constant state of fire fighting.

this whitepaper on Operational Excellence in Healthcare

The tools of Lean Six Sigma help by improving overall operating efficiencies. As a result, reduced defects lead to increased quality and optimizing processes lead to lower cost. And as a result, employees will benefit through the reduced amounts of rework, crisis and associated anxieties, thereby allowing higher levels of job satisfaction and enrichment. The application of the Lean Six Sigma begins a cycle of continuous improvement and change. Cumulatively, the benefit to society as whole will be an improvement in the consistency, predictability and quality to health care itself.

I’ve had a number of conversations this week with leaders focusing on improvements in supply chain management, specifically in a warehousing operation. This reminded me of a supplychainbrain.com article from some time back that featured one our our long-running customers and made the argument that companies should think about their warehouse/distribution center floor for some low hanging fruit performance improvements. Warehouses and distribution centers are mission critical components of the overall supply chain, but seem to get very little attention when it comes to process improvement. This is a mistake as a careful analysis would likely show things like:

this short Executive Brief that discusses the importance of CI for companies whose business success is a clear function of effective and efficient warehouse and distribution operations  namely 3PLs. Relevant reading even if youre not a 3PL, but have warehousing and distribution operations

Now, what can you do about it. A focused effort to analyze the underlying processes, not the activities, of the warehousing operation may provide a cost-effective answer. Structured process improvement approaches, when applied correctly, can make a dramatic positive impact to these operations. At a high level, the goal is to understand the core processes, identify to the highest value performance gaps, and then design and implement right-fit improvements. Where might focus be directed?

Poor warehouse layout & design?

Warehouse process flows are not well defined and therefore the warehouse is cluttered and disorganized, possibly dangerous?

In the article Charlie Jacobs discussed how APL Logistics (a long time Qualtec client) rolled out a simple but effective lean based continuous improvement program that made improvements in several of these areas, saving one customer over $1M. That alone should raise some eyebrows!

Might Continuous improvement (CI) be making a comeback after a several years of being severely cut back or outright eliminated? I think they just might be, and I see it most in service delivery organizations. But, they’re doing it for different reasons and they’re doing it in a different way. Simple and light-weight trumps top-heavy and complex. Near-term wins reign supreme over long-term initiatives.

Why the re-emerging interest? Well, the simple answer is that things are just different than they were, even just a few years ago. I talk to business leaders every day, and I don’t hear we want to start a program to instill a culture of quality and continuous improvement in the company. No, what I hear about are specific business problems, and immense pressure to immediately and inexpensively fix the problems. Feel good corporate initiatives are out …. in the trenches get it done thinking and actions are in.

Problems in service organizations seem to cluster around being able to deliver an increasing service level while maintaining or growing margins, WITHOUT adding headcount. Its do more with less (or at least with what we have). This insight doesnt bode well for the near-term employment outlook, but its what I see nonetheless.

And, its not just the reasons for doing CI that are different. The way business leaders want to do CI is also different. There is almost no appetite for big dollar, infrastructure-heavy corporate initiatives. The focus is almost entirely on quick wins show me the money. Now, I know there are some practitioners out there might say that a focus on near term results is just a recipe for disaster, but I just dont think so. We have to live in the real world, and this world requires a shift in perspective.

So, my argument …. For many service organizations, fundamental Business Process Management (BPM) and Lean combined with some light-weight infrastructure components can make for an incredibly cost-effective way to make near-immediate, high impact improvements and set the stage for long-term sustainable results. A true win-win.

In a services environment, simple BPM and Lean allows you to consistently execute well-defined, low risk, and high impact projects that are clearly aligned with the real goals of the business …. for many, a better path to Continuous Improvement

BPMcrystallizes value streams (processes) and establishes measurement systems that clearly identify the highest value gaps in performance, from both customer and business perspectives. These gaps represent business cases, and ultimately, projects. Define a good prioritization approach, and you have a project pipeline.

a BPM Overview presentation

Lean is an inexpensive and highly effective way, then, to execute those projects and close those performance gaps. Now, there is not doubt that not all projects identified will be lean projects. You will for sure find capital projects, six sigma projects, and even some process redesign projects. BUT, my experience is that a significant number of the highest value projects in service and service delivery organizations are indeed Lean projects. They focus on doing more with less, reducing cycle time, or reducing cost. Thats lean.

this short .ppt overview of Lean for Service Operations

BPM and Lean. Done well, you can get near-term results AND set the stage for long-term sustainable results. And, the beauty of it is that it can be very lightweight and cost-effective. Contact me if you want to discuss how this lightweight approach to CI might work for your organization.

I routinely speak with managers who have been tasked with implementing or supporting the implementation of large-scale enterprise software solutions. All raise a similar set of frustrations:

There are a LOT of options, all very different. I just dont know which is right for us

Its taking much longer than we thought to do this and negatively impacting our business

Integration and customization costs are out of control and way over budget

We have the system installed and up, but can’t get people to use it …

Were different. We just dont do things in a standard way and no system seems to be able to handle our requirements. Guess well have to build internally

Coincidence that I keep hearing the same comments? I think not. From my experience, this is absolutely the rule, not the exception. Now, the question is why does this consistently happen?

I think its simply a matter of putting the cart before the horse. So often, technology is looked at as a silver bullet to solve business problems when, in reality, the problem is one of process and not product (i.e. technology solution). Lets put this into perspective technology solutions should sit on top of good business processes and ideally enable those processes to function better, faster, and cheaper. But,what happens when you try to overlay an ill-defined or just plain bad business process with a technology solution? You guessed it experiences like those outlined above.

Start with top level enterprise metrics and a high level value-stream. Identify the key value adding processes, their associated owners, and the metrics those owners manage to. This will help identify critical stakeholders and to crystallize the reporting that is really required

Start breaking down those top-level processes and characterizing across all operations. Are all operations doing things the same way, measuring the same things, etc? Most likely, they are not. Where differences exist, work collaboratively to identify best practices and consolidate to a best-of-breed process.

Look for unnecessary complexity, waste and defect-producing aspects of processes. Run focused improvement teams to correct. Remove the fat and make processes as LEAN as possible BEFORE trying to systemize. Waste and complexity in processes equals increased cost for system integration and customization, GUARANTEED.

Payoff. From steps 1-3 above, a well-defined and actionable set of requirements will be derived AND prioritized. This helps with product selection AND with system integration, customization and testing. Get it right the first time … what a concept, right?

Of course these actions will take some time on the front-end, but my contention is that the time and expense of doing this process work in front of a system implementation will almost always pay for itself many times over. Sometimes we seem to for get that it’s the business processes that serve customers and produce revenue, not the technology youre trying to implement to supposedly improve those processes.

A little preparation and risk prevention now, or a lot of pain and suffering down the road? You make the call .

Feel free to contact me if you’d like to discuss. I’d love to hear your insights and ideas.

Business models becoming more complex, customers asking for more and more for less and less, competition much more fierce, and an incessant demand to keep costs (headcounts) down  a new reality that is not just gently suggesting, but demanding more effective utilization of available, and often scarcer, resources.

Enter – shared-services organizations. A shared services organization (SSO) can theoretically consolidate support operations into a single organizational unit and substantially improve operating efficiencies by eliminating duplication and excess overhead, and streamlining and standardizing processes. The SSO should be able to deliver a substantially better service at a substantially lower cost. It should be a center of both value creation and cost reduction for the enterprise. If it cant do this, you have to ask whats the point?

In concept, establishing a well-functioning, value-delivering SSO sounds really simple. BUT, reality says not so fast. I work with companies every day, and its a very rare event (and thats generous) for me to hear someone say their internal shared service organizations deliver the highest-quality, while being the lowest cost provider of services. Why is this? Optimized internal SSOs should be able consolidate, standardize, and optimize known best practices for the enterprise, right? They should be able to align with the strategic direction and goals of the company, and orient service levels towards improving customer experience, right? I mean, theyre part of the enterprise, so they should be able to do these things at least as well and an external provider of the service, right?

Theres more to good shared services organizations than just consolidating people and systems

Often times, it does seem that a shared services organization was built simply by throwing together people and systems from different areas and groups. All I can say is good luck with this approach. In reality, it requires a change in mindset and an increased focus on the overall business, and a hard look at the processes that are really needed to drive the business. No more living in that isolated black box. Successful SSOs integrate aligned and continually optimizing processes with right-fit people, information, and technology automation to deliver a totally new level of capabilities.

a short powerpoint overview of Lean in Services Operations …

a example approach to applying lean at an operations level …

Understand the value stream, end-to-end, from both the customer AND the producer perspective. You cant optimize what you dont understand.

Establish meaningful and actionable service and process metrics that serve all customers of the service. Make the metrics visible.

Focus on driving efficiency by eliminating wasteful, non-value-add steps and unnecessary complexity — from supplier, producer, and the consumer of the service.

Constant focus on customer experience, alignment, and process improvement. Well-executed, targeted Kaizen events can deliver improvements in weeks or days, not months or years. And, those improvements positively impact all customers of the service.

There are many other examples, but the point is that if youre looking for a place from which to pull significant additional value, then you may need to look no further than then enterprises shared services organizations. And Lean may be a powerful and extremely cost-effective tool to apply. As always, feel free to contact me directly if youd like to discuss in more detail.

Improvement is about change, and change is tough. It doesnt matter if you are trying to change personal health habits or a critical business process, its just tough. But change in Service Operations is particularly difficult because so much is not visible to easy inspection, embedded in individuals, lacking data, in constant flux, and dependent on many variables. These same challenges apply to deploying Lean in Service and Back Office operations.

A natural path many disciplined thinkers follow for any improvement of any type is to thoroughly understand the total system before embarking on improvement. But within Service Operations the complexities are so great that to thoroughly understand the system requires so much time and investment that the business gives up on the effort before ever getting improvement activities that yield results off the ground. This is made even more challenging because of the tight resource constraints we face in this economic environment and the demands of ever more discriminating customers. As in all businesses these days, Service Operations must do more with less.

Our proposed philosophies at a deployment level, about which we have written often, are things like pulling capability development at the rate the business needs it, building foundational capabilities broadly before developing advanced capability, paying for new capability development by providing hard returns on investments as they are made, and aligning resources and efforts to business and customer metrics (i.e. things that really matter).

a short Powerpoint discussing Lean in Service Operations …

We take these philosophies down to a project execution level by building an understanding of the project problem solving roadmap and moving back and forth between tools to validate project assumptions while using a lot of tollgates so as to invest time wisely. Use a problem statement and simple SIPOC to define goals, owners, team members and the process. Take that to tollgate to ensure alignment before moving to deep process characterization. Use the SIPOCs process column to do a preliminary value stream with some simple time and quality assumptions and conduct a tollgate review before moving to functional flow charts or collecting data. Do a simple fishbone diagram to validate the demographics of the data before moving to a more detailed FMEA or creating a data measurement system. And constantly validate the business case and alignment.

The point is that the need to use resources wisely and drive change counter intuitively means we should take many smaller steps rather than looking for the big steps. The complexity and immaturity of the system makes the understanding of the overall system too expensive and the success of a big, top down project too low a probability. Keep this in mind when trying to deploy Lean in a services operation, and your chances of success improve greatly.

If you would like to discuss any of these points, feel free to contact me .

We have many conversations with companies that want to talk about applying lean in areas other than manufacturing. Some of these companies are manufacturers that have been doing Lean for years, and doing it well in their productions operations, but not at all in non-manufacturing parts of the business. Others are pure services companies like telcos, banks, and insurance companies that are just now starting to explore Lean. In many cases, theyre looking at Lean because theyre being asked to do more with the static or declining headcounts.

One of the challenges that I keep seeing is that companies try to do Lean Manufacturing in a services environment. Let me be blunt if you think you can blindly copy the tools of Lean manufacturing in a services environment, youre setting yourself up for failure. We see this happen when manufacturing companies that have had great success with Lean in the production operation try to take their Lean manufacturing experts and approaches and leverage them to roll out Lean in services operations. These people may indeed be Lean manufacturing specialists with great knowledge, but this doesnt mean they can effectively roll out Lean in non-manufacturing aspects of the business. In most cases, it doesnt work. The same thing happens when services companies hire a Lean manufacturing expert to help them. It just doesnt work. Why? Because Lean in a services operation is just different, thats why.

this powerpoint overview of Lean in a Services environment …

Now, we could dive right in and start looking at a lot of individual tools and see which ones fit well in a services environment and which ones dont. But, I think the better approach is to take a step back and look at the differences from a business perspective first, then come back and start talking about tools and approaches. So, here are some of my thoughts on how a services environment is different, and these difference most certainly impact the way Lean should be rolled out. I encourage our readers to chime in with their own ideas.

There is typically greater involvement of customers in the production process. In many cases, the customer is a supplier to the process. Sometimes the involvement is so ingrained in the process that you really end up with co-production with the customer.

Since services processes are often very people-centric (vs. machine-centric), it is very difficult to get to real standardization.

Quality is an experience, not just a measurement against specifications. The inability to standardize the process makes it very difficult to standardize quality. The customers definition of quality is a perception, subjective vs. objective

There is much less visibility to what is happening. Information is flowing, not product, and that information can be digital, paper, or even verbal. And, HOW it flows often has little or no standardization

IT systems play a much bigger role. They enable the process, but can also be a rigid constraint on the process. There may be multiple and often un-integrated systems. Workarounds persist in the form of excel spreadsheets, word docs, etc

WIP and inventory are often hidden and ignored, but they are there and can have the same negative impacts as in a manufacturing environment (e.g. wasted resources, longer lead times, more variation

These are just a few of the key distinctions, and there are many more. But they do point out some fundamental differences in manufacturing and non-manufacturing operations. The differences are so stark that common sense should tell you that you cannot roll out Lean in a services operation the same way you do it in a manufacturing operation, not if you want to see results, and our experience here at Qualtec backs that up.

This is but the first in a series of articles well publish on this. I invite your thoughts, comments and feedback. Feel free to contact me if youd like to discuss.